Mob Muscles Its Way Into Politics in Bulgaria

Muscular men known as thick necks hang out in nightclubs like Sin City in Sofia, Bulgaria.Credit
Nikolay Doychinov for The International Herald Tribune

SOFIA, Bulgaria — Politics is played to the death in Bulgaria, where the lives of politicians can be as cheap as spent bullets and murky business groups wage a murderous struggle for their cut of everything from real estate deals to millions in European aid.

During a furious political season last year, the home of the chairwoman of a municipal electoral committee was set on fire, and the garages of mayors were firebombed. The mayor of a resort town in central Bulgaria was shot and killed with seven bullets, as was the wealthy City Council chairman in the outwardly idyllic Black Sea port of Nesebur.

“Other countries have the mafia,” said Atanas Atanasov, a member of Parliament and a former counterintelligence chief who is a magnet for leaked documents exposing corruption. “In Bulgaria, the mafia has the country.”

By almost any measure, Bulgaria is the most corrupt country in the 27-member European Union. Since it joined last year, it has emerged as a cautionary tale for Western nations confronting the stark reality and heavy costs of drawing fragile post-Communist nations into their orbit, away from Russia’s influence.

European Union membership has done little to tame the criminal networks in Bulgaria. It has arguably only made those networks richer, raising worries that if the union cannot tamp down criminal activity in a member like Bulgaria it may have little sway over other fragile nations that want to join.

The United States helped Bulgaria into NATO, has rotated troops through for joint exercises since 2004 and has tried to encourage commerce, education and democracy. It has just announced that it will invest more than $90 million in facilities and equipment for joint use in military exercises.

The European Union, eager to improve the lives of the 7.5 million Bulgarians, has promised 11 billion euros, or nearly $15 billion, in aid.

Far from halting crime and violence, the money effectively spread the corruption. Once Bulgaria’s shady businessmen realized how much European Union money was at stake, said many of Sofia’s advocates for reform, they moved from buying off politicians to being directly involved in politics themselves.

And so European officials froze almost $670 million in financing this summer and may halt the flow of billions more, alarmed at freewheeling white-collar criminals with links to the very highest reaches of power.

The nation’s homegrown mobs of men in black — the “mutri,” or mugs — control construction projects in city halls. And questionable business networks have moved from declining black markets for smuggled cigarettes and alcohol to legal investments in booming real estate. They have made their mark on the capital’s atmosphere: men nicknamed “thick necks” for their muscular appearance linger in neon-lighted nightclubs like Sin City and Lipstick, or keep watch over Mercedes jeeps and Audis outside. Sofia guidebooks offer tips: Avoid restaurants that draw businessmen with four or more bodyguards.

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Newly politicized business networks with practices under scrutiny have made their mark on clubs like Sin City in Sofia, Bulgaria.Credit
Nikolay Doychinov for The International Herald Tribune

Now, men like this are muscling into public office.

Ties to Top Officials

Investigators with the European Union’s antifraud office are focusing on the Nikolov-Stoykov group, a sprawling conglomerate of dozens of companies with interests from meat processing and cold storage to scrap metal and a Black Sea resort.

The group’s leading partners — both briefly detained last year on suspicion of fraud — boast top connections. Ludmil Stoykov helped finance the campaign of President Georgi Parvanov, organized a business group supporting him and maintained ties to a former deputy minister of foreign affairs.

Mr. Stoykov, who has not been charged with any crime since his arrest last year, denies knowing about criminal activities involving European Union funds. “I categorically object to these attempts to stain my name and to be treated as a criminal,” he said in answer to written questions.

He acknowledges giving 25,000 leva, about $17,000, as a campaign contribution to Bulgaria’s president. “I participated with a donation according to all requirements by the law,” he said. “And no one is saying the opposite.”

His partner, Mario Nikolov, who is scheduled to stand trial next week on fraud charges, forged discreet alliances to Prime Minister Sergei Stanishev, according to contracts and bank deposit slips turned over to prosecutors last week by Boyko Borisov, the mayor of Sofia, who is a fierce rival of the prime minister. Those documents show he steered more than $137,000 to Mr. Stanishev’s Socialist Party as contributions from his companies.

In an unusually blunt report leaked this summer, European Union fraud investigators accused the Nikolov-Stoykov group of being a front for a “criminal company network composed of more than 50 Bulgarian enterprises and various other European and offshore companies.”

Among the European Union investigators’ accusations were tax and subsidy fraud: taking development aid to buy new equipment for companies and then passing off ancient equipment from the former East Germany and pocketing the difference. The companies were also accused of illegally importing huge quantities of Chinese rabbit meat for export to France and Germany with fake health certificates from Argentina.

Reached at his office at Eurofrigo, a cold storage company in Sofia, Mr. Nikolov repeatedly declined to comment on the documents indicating contributions to the prime minister, which Bulgarian prosecutors said Wednesday were under formal investigation. After the European fraud report was leaked, Mr. Nikolov said: “I became public enemy No. 1. I am afraid for my life.”

Mr. Stanishev, the prime minister, did not respond to 10 attempts to seek comment over a six-day period. A former journalist educated at the London School of Economics, Mr. Stanishev was called “Mr. Clean” by President Bush last year for his efforts to fight organized crime. After other European nations started complaining about aid fraud, Mr. Stanishev said publicly that there was no “umbrella” of protection for rich businessmen or organized crime figures.

But when he made those comments, it was not known that he met in 2005 with Mr. Nikolov. A five-minute video obtained from Sofia’s mayor shows Mr. Stanishev greeting Mr. Nikolov at his meat factory, inspecting equipment and a table laden with goose liver sausages before sitting down to lunch with white wine.

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Atanas Atanasov, a member of Parliament, said the mafia had overtaken Bulgaria, where corruption may be Europes worst.Credit
Nikolay Doychinov for The International Herald Tribune

A few weeks later, according to deposit slips handed to prosecutors by Mr. Borisov, Sofia’s mayor, contributions to Mr. Stanishev’s party started to flow. One Western European diplomat, who spoke anonymously because of being involved in sensitive negotiations in Bulgaria, said that copies of the contractual agreements on donations appeared authentic: “It means they know they won’t be prosecuted, so why not have secret contracts?”

A summary agreement was addressed to Rumen Petkov, who headed the Socialists’ campaign at the time and resigned as interior minister a few months ago amid revelations that he had met organized crime figures.

Origins of Crime

Bulgaria’s gray economy is looped around disparate politically connected companies that shift in and out of business as opportunities and legal obstacles arise, according to a report from the Center for the Study of Democracy, an anticorruption group in Sofia.

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According to the center and other anticorruption activists, bosses typically enlist longtime employees to register companies in their names; if there are legal problems, the companies cease functioning without being linked to the actual leaders. Meanwhile, profits from sources like cigarette or alcohol smuggling are plowed into legal front companies, like soccer clubs, where money can be laundered through huge fees paid for transfers of players.

The competition is brutal: all three past chairmen of the soccer club Lokomotiv Plovdiv have been killed, one by a sniper by the Black Sea. Seventy-five percent of Bulgarian businesses have security protection, far more than in other countries in Eastern Europe, according to Enterprise Surveys, analysts for the World Bank.

As in Russia and some other Balkan nations, corruption has seeped into the fabric of life. Sofia has a thriving black market for blood outside hospitals, where patients’ families haggle over purchases with dealers, according to Bulgarian news reports that track the prices.

The roots of this organized crime date to the collapse of Communism in the early 1990s. Thousands of secret agents and athletes, including wrestlers once supported and coddled by the state, were cast onto the street. During the United Nations embargo of warring Serbia in the 1990s, they seized smuggling opportunities and solidified their networks.

The wrestlers, in particular, developed private security forces and insurance companies that were little more than shakedown protection rackets. Other men became shadowy entrepreneurs with close ties to the government.

In the past five years, Bulgaria has weathered machine gun assassinations and inventive daylight attacks. Hitmen disguised themselves as drunks and Orthodox priests. In 2004, a bomb planted atop an elevator in central Sofia was detonated by cellphone, killing a businessman and three bodyguards.

The toll now tops more than 125 contract killings since 1993, according to a list compiled by the United States Embassy in Sofia, which does not include at least four people killed this year, including the head of an energy company. Most of the killings are unsolved.

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Victims of the assassinations and other attacks that have disrupted Bulgarian life may end up in the Central Sofia Cemetery.Credit
Nikolay Doychinov for The International Herald Tribune

A Power Grab Begins

Admission to the European Union did not halt the carnage, but emboldened a power grab. According to corruption fighters and election observers, votes can be traded, depending on the town, for marijuana cigarettes or sold for up to 100 leva, or $69. People document their votes by taking pictures of their ballots with their cellphone cameras, according to Iva Pushkarova, executive director of the Bulgarian Judges Association.

“They trade votes freely on the streets, kill and threaten people with no shame,” Ms. Pushkarova said.

While corruption affects many corners of society, the impact is particularly stark in the legal system, where some people without political connections have resorted to hiring decoy lawyers, for fear that their legal documents would vanish if presented to particular clerks by lawyers recognized as working for them.

Kremikovtzi, an insolvent Communist-era steel plant and one of Bulgaria’s largest companies, has become a test case. Foreign creditors — many of them American hedge funds — are pursuing a $474 million claim against Kremikovtzi, whose former chief executive is under investigation by the Bulgarian authorities for fraud and embezzlement.

“When your law enforcement system isn’t cleaning up the corruption in the legal system, who do we go to?” asked Justin Holland, an adviser to the Kremikovtzi investors committee, “Literally, we cannot go to anybody in Bulgaria.”

Among Western nations, impatience is growing, particularly at the lack of trials of high-level government officials accused of corruption. As Frans Timmermans, the Dutch minister for European affairs, argued, “What we need to see is real people put before real judges, convicted and put in jail.”

Meglena Pluchieva, Bulgaria’s newly appointed deputy prime minister for oversight of European government funding, said she believed that the nation was making headway similar to that of nations that joined the European Union a few years earlier, in 2004. The difference is that then there was enthusiasm for union expansion, but today “the situation is entirely different,” she said. She also accused wealthier nations of double standards, citing a scandal over rotten meat in Germany last year.

Germany complained of getting little local help in its effort to prosecute Konstantin Hadjivanov, a wealthy businessman and a member of the City Council in Petrich, Bulgaria, who is known as “the Kitty.”

So the Germans waited until he had stepped into Greece to serve their warrant. Now he sits in a jail cell on cigarette smuggling charges while facing another fraud inquiry.

But it is only a matter of time before he returns home to resume his political career, say his supporters and wife, a former Mrs. Bulgaria.

City elections, canceled once because of irregularities, took place on Saturday. From his Greek jail cell, Mr. Hadjivanov gamely ran for re-election, but the voters finally rebelled: He won less than 1 percent of Petrich’s vote.

A version of this article appears in print on , on Page A1 of the New York edition with the headline: Mob Muscles Its Way Into Politics in Bulgaria. Order Reprints|Today's Paper|Subscribe